Sugarcane growers stand by claims of job losses linked to sugar tax

Job losses in the sugar sector are accurate, says the South African Canegrowers Association in response to a Wits University report shooting down its claims that more than 16,000 people have lost their livelihoods as a direct result of the sugar tax.

The association says independent and industry data supports its assertion that thousands have lost their jobs in the sugar industry since the Health Promotion Levy (HPL) – also known as the sugar tax – was introduced in April 2018 in response to the rising prevalence of obesity  in SA and its related comorbidities of diabetes, heart disease and cancer.

It also accuses the researchers, from the SA Medical Research Council (SAMRC) and the Wits Centre for Health Economics and Decision Science (Priceless SA), of reaching “incorrect and disingenuous” conclusions based on unrepresentative data.

Last week, the association said the tax had crushed the market for sugar, suppressed investment critical for transformation and cost 16,000 jobs.

Two major sugar mills, Tongaat Hulett and Gledhow Sugar, have been forced to undergo business rescue proceedings, but Tongaat Hulett has been experiencing financial difficulty for some time.

Predicated on the Quarterly Labour Force Survey data from Statistics South Africa, the Priceless researchers sought to determine how many jobs were lost because of the implementation of the HPL.

One major concern regarding the tax – similar to concerns raised about taxes on tobacco and alcohol – was potential job losses in the production, distribution and sale of sugary beverages, the researchers said, noting that the industry argument had led the government to delay raising the levy rate, lowering the sugar threshold and expanding the tax to include fruit juices until 2025.

However, independent research from Mexico, Peru, San Francisco, Illinois and California showed there was no significant employment decline linked to taxes on sugary beverages.

It concluded that there was no evidence of job losses because of the levy and, considering the success of similar taxes on sugary drinks worldwide, the current HPL rate seemed too low. So, to discourage excessive sugar consumption and generate more revenue for public health initiatives effectively, the government should consider raising the tax rate to the World Health Organisation’s recommended 20% threshold and taxing fruit juices too.

The research, which was published in April this year, has not been peer reviewed yet.

The Healthy Living Alliance (Heala), an activist organisation that has advocated a steeper increase in the HPL because it believes the 11% tax is having little effect on consumer behaviour, says the Treasury should raise the tax to at least 20% because of the impact on the populace.

South Africa has alarming rates of obesity and diet-related diseases such as diabetes and heart disease: 70% of women and 33% of men are overweight or obese.

The sugar industry, Heala argues, is misrepresenting the impact on jobs, while taxpayers and the state are bearing the huge health costs of obesity and other conditions. Claims of thousands of jobs being lost are “baseless and unfounded”, it says.

A 2022 Priceless SA study found that the health impact was “costing South Africa’s health system R33-billion a year, which is 15.38% of government health expenditure and is equivalent to 0.67% of GDP. The annual cost per person for someone who is overweight or obese is R2,769.

“The science is clear that the overconsumption of sugar in liquid form is highly dangerous for our health,” Heala notes on its website. “The evidence shows that independent of the ‘empty’ calories from sugary drinks, the sugars in sugary drinks alter the body’s metabolism, affecting insulin, cholesterol and metabolites that cause high blood pressure and inflammation. These changes to the body increase the risk of diabetes, cardiovascular disease, tooth decay and liver disease.” 

The sugar tax is generating much-needed revenue for the fiscus, Heala says, noting that, since its inception in 2018 to 31 March 2021, R7.9-billion in cumulative revenue was derived from domestically produced and imported products. By raising the HPL to 20%, the revenue collected from it could almost double.

SA Canegrowers says the research has drawn incorrect and disingenuous conclusions by using the Quarterly Labour Force Survey data set averaging employment in the full agricultural sector of South Africa, which includes major employers such as the grain, citrus and livestock sectors, even though the sugar tax had little to no impact on those sectors.

By considering unemployment trends across the entire agricultural sector, which employs significantly more people (over 900,000 directly) than sugarcane farming alone (there are about 22,000 canegrowers in South Africa, of which 21,000 are small-scale growers), the conclusions drawn are not representative of the sugar sector, the association said. The sugar industry, including growers, supports an estimated 65,000 direct jobs and 271,000 indirect jobs, so the tax has a real and direct impact on the demand for sugarcane. “To suggest otherwise is in bad faith,” the association said. It also questioned the motivation of the researchers, who “may be conflicted” because they had been a major advocate of this tax.

Referencing an independent study by the National Economic Development and Labour Council (Nedlac), released in 2020, Higgins Mdluli, chairman of SA Canegrowers, said job losses in the sugar and beverage industries were estimated at 16,000.

“The Nedlac study compared employment figures in the industry between 2017 and 2019 and found that more than 9,700 jobs were lost by commercial and small-scale canegrowers after the sugar tax was introduced in 2018. These job losses happened before the Covid-19 pandemic and the associated disruption of the economy after 2020, in contrast to the conclusion by the SAMRC/Wits study.”

The South African Sugar Association also estimates a 250,000-tonne drop in domestic sugar sales because of decreased demand from local buyers since the tax was imposed.

Even a small increase in the sugar tax would lead to decreasing areas of land under sugarcane cultivation because of the decreasing demand for sugar, Mdluli said. He added that the biggest job losses would be among small-scale growers in KwaZulu-Natal and Mpumalanga. DM

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